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Wednesday, February 18, 2015

Admittedly the vessel is berthed at the Madras harbor and, therefore, the Madras High Court alone had jurisdiction to entertain any claim against the subject vessel as per provisions of Section 3(15) of the Merchant Shipping Act, 1958. The arrest of vessel by the Madras High Court being the first arrest, the vessel and the sale proceeds are custodial legis of the said court and no proceedings in Bombay High Court can be maintained subsequently without leave of the Madras High Court. It is also not in dispute that after the decree got transmitted to the Madras High Court, appellant had again moved Bombay High Court and obtained attachment order without notice to the creditors and claimants before the Madras High Court, which act of the appellant clearly exposes that it conveniently wanted to avoid any contest of its claim by other creditors/claimants. It has not been disputed by the appellant that the Bombay High Court while passing the order of attachment was not aware about the fact that the vessel was seized by the Madras High Court much prior to the filing of the suit by the appellant in Bombay High Court. The Division Bench in the impugned order has recorded the finding that Madras High Court while deciding the issues in the suit filed under admiralty jurisdiction had considered the interest and also priorities of all interveners and also parties to the suit. It was held that the appellant ought to have made claim under Order XLII Rule 11 of the OS Rules. The Division Bench rightly held that no court is so prestige conscious that it will stand in the way of legitimate legal proceedings for redressal or relief sought for by the litigant. The Court also took notice of the fact that the necessary parties who had led their claims had not been impleaded by the appellant in the proceedings. 30. In the facts and circumstances of the case and having regard to the law settled, so far the admiralty jurisdiction of the Court is concerned, we do not find any reason to differ with the findings recorded by the Division Bench of the High Court in the impugned order. For the reason aforesaid, we do not find any merit in this appeal, which is accordingly dismissed, however with no order as to costs.

'REPORTABLE'

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6156 OF 2005

Petromarine Products Ltd. ...Appellant (s)

versus

Ocean Marine Services Company Ltd.
and others ...Respondent(s)

JUDGMENT

M.Y. Eqbal, J.:

This appeal is directed against the judgment and order dated
27.11.2003 passed by a Division Bench of the High Court of Madras in OSA
No.175 of 1998, dismissing the appeal of the appellant, upholding inter
alia the disbursements made by Single Judge of the sale proceeds received
by sale of the ship in question named as motor vessel 'Eleni'.

2. The factual matrix of the case is that in February, 1997 Respondent
No.1 filed a suit being C.S.No.97 of 1997 under the Admiralty Jurisdiction
of High Court of Madras, for recovery of US$ 22,705.84 against Respondent
No.3 herein along with an application praying for an order of arrest of the
vessel which arrived at Port of Madras. The High Court in terms of Order
dated 27.2.1997 issued arrest warrant. Whereas in the Bombay High Court,
Appellant filed an admiralty suit A.S.No.27 of 1997 in March, 1997 for
recovery of amount of US$ 39,712.97 i.e. the security of Appellant's suit
claim. On 19.03.1997, Bombay High Court directed the order of arrest of
Vessel M.V. Eleni.

3. Meanwhile, High Court of Madras appointed Respondent No. 2 as the
Advocate Commissioner. On 25.04.1997, terms and conditions for sale were
approved by the Madras High Court. Publications with respect to the sale of
the said vessel were made in various newspapers. Unaware of such
proceedings, Bombay High Court, on 11.09.1997, passed an ex-parte decree
in the suit filed by the appellant for a sum of US$ 50,081.74 with
interest, which was communicated to the Advocate Commissioner (Respondent
No.2), appointed by the Madras High Court, with a request to take note of
their claim against the Vessel. The Sheriff of Mumbai also communicated to
Respondent No.2 on 21.10.1997 that the Vessel MV ELENI was arrested in due
compliance of Warrant of Arrest dated 18.03.1997 and 21.03.1997 passed by
the High Court of Bombay and requested them to take note of the arrest
order passed by Bombay High Court. Before the aforesaid decree
transmitted by the Bombay High Court was received by the Madras High Court
on 24.1.1998, learned Single Judge of the Madras High Court confirmed the
sale in favour of M/s. Jansee Steel Industry Pvt. Ltd. on 24.10.1997. In
the execution petition moved by the appellant in February, 1998, Bombay
High Court issued notice under Order 21 Rule 52 of the C.P.C., requesting
the Madras High Court to hold the decretal sum in an aggregate amount of
US$ 58,325.64 from and out of the funds deposited by M/s. Jansee Steel
Industries.

4. It is worth to note here that the tender of M/s. Jansee Steel
Industries had been challenged by another company M/s. Bancorex by way of
another suit being O.S.A.No.15 of 1998, which ultimately was allowed on
23.4.1998 by Madras High Court by setting aside the confirmation of sale
made in favour of M/s. Jansee and the matter was remanded to the Single
Judge to ensure that the best possible price is secured. Consequently,
learned Single Judge accepted the only bid of M/s. Jansee Steel Industry
Pvt. Ltd. for a sum of US$ 4,70,000 and they were directed to pay the
balance consideration within three weeks, failing which the earnest money
deposited by them would stand forfeited. Advocate commissioner was also
directed to deposit the entire amount to the credit of the suit. Madras
High Court confirmed the sale made in favour of M/s. Jansee Steel Industry
Pvt. Ltd. on 05.10.1998 and ordered reimbursement of cost of sale, payment
to the crew members and charges to the statutory authorities.

5. On 25.09.1998, Bombay High Court informed the passing of ex-parte
decree in favour of appellant and asked Registrar of the Madras High Court
to remit the funds lying attached pursuant to Order 21 Rule 52 Notice. On
7th October 1998, Bombay High Court made a further order in favour of the
appellant who filed execution petition in the Bombay High Court. The
Registry of Bombay High Court sent letters dated 28.01.1999, 09.03.1999 and
11.03.1999, requesting the Registrar of the Madras High Court to give reply
for non-remittance of the attached funds. Finally, on 03.09.1999, Bombay
High Court gave liberty to the appellant, to obtain suitable orders from
the Madras High Court and closed the Execution Application.

6. Meanwhile after the confirmation of the sale, the sale proceeds were
disbursed to the crew members of statutory authorities and a direction was
issued on 6.10.1998 to the commissioner to deposit the balance amount of
Rs. 12,38,164/-.

7. Thereafter, appellant challenged the order dated 06.10.1998 passed by
single Judge in Application No.1217 of 1997 in C.S.No.97 of 1997, pleading
before the Division Bench of the Madras High Court that on the service of
notice issued by the Bombay High Court under Order 21 Rule 52 CPC, the
appellant was entitled to the decretal amount alone and the amount attached
ought not to have been disbursed to third parties and the custody court
namely the Madras High Court has no authority to make rateable
distribution. Per contra, it was submitted on behalf of the respondents
before the Madras High Court that the appellant failed to bring to the
notice of the Bombay High Court that the Madras High Court was already
seized with the matter. Had the appellant brought to the notice of the
Bombay High Court about the proceedings entertained by the Madras High
Court, which were much prior to the suit filed by them, the Bombay High
Court would not have passed the attachment order.

8. After hearing learned counsel for the parties, Division Bench of the
Madras High Court dismissed the application keeping it open for the
appellant to lay their claim under Order XLII Rule 11 of Original Side
Rules. The Division Bench held that once the suit is filed invoking
admiralty jurisdiction of the Madras High Court, the suit in rem, it
decides the interest of not only parties to the suit but also other parties
who are interested in the property under arrest or in the fund. The High
Court observed thus:-

"Madras High Court, while deciding the issues in the suit filed under
admiralty jurisdiction has considered the interest and also priorities of
all interveners and also parties to the suit. We follow the judgment of
Apex Court in M.V. Elisabeth and others vs. Harwan Investment & Trading Pvt
Ltd., Hanoekar House, Swatontapeth, Vasco-De-Gama, Goa, reported in AIR
1993 SC 1014. The catena of judgments relied on by the appellant are no way
useful to them. The appellant ought to have made the claim under Rule 11
of Order XLII of O.S. Rules. In the ordinary course, no Court is so
prestige-conscious that it will stand in the way of legitimate legal
proceedings for redressal or relief sought for by the litigant. We find
that necessary parties are not impleaded by the appellant herein and Jansee
Steel Industries Pvt. Ltd., which is sought to be impleaded as seventh
respondent in this appeal, is not a necessary party to resolve the disputes
involved in this appeal. It is not open to the appellant to convert the
appeal against the order dated 05.10.1998 instead of 06.10.1998, as the
leave was granted to file the appeal only against the order dated
06.10.1998. Liberty was granted to Appellant to file their claim under
Order XLII Rule 11 of O.S. Rules."

9. Hence, this appeal by special leave by the appellant.

10. Ms. Vijaylaxmi Menon, learned counsel appearing for the appellant,
assailed the impugned order passed by the Madras High Court on various
grounds. At the very outset, learned counsel submitted that the High Court
erred in holding that money lying with the Advocate Commissioner was
custodial legis. Learned counsel contended that the High Court in the
impugned judgment overlooked that the appellant-execution creditor
attempted to intervene in the pending admiralty suit in the Madras High
Court on 12th December, 1997 leading to an order dated 24th January, 1998,
whereby the appellant was directed to work out its remedies in execution.
In other words, the appellant was not allowed to intervene in the pending
admiralty suit in the Madras High Court. On the contrary, the High Court
held that the appellant ought to have been intervened in the suit with its
application under Order 42 Rule 11 of the Original Side Rules of the Madras
High Court.

11. Ms. Menon further contended that there is nothing in the aforesaid
O.S. Rules that requires a decree holder, who has secured a valid
attachment, to seek to intervene in the pending admiralty suit,
particularly, when in the previous application filed by the decree holder,
an order has already been passed directing the decree holder to work out
its remedies in execution.

12. Learned counsel further contended that the High Court overlooked the
grievances of the appellant and failed to appreciate the fact that the
custody Court was acting in a dual capacity of an admiralty Court vested
with the higher degree of responsibility and accountability upon both the
Registrar of Madras High Court and the Advocate Commissioner appointed in
the pending admiralty suit.

13. Lastly, learned counsel submitted that the order of Bombay High Court
dated 3rd September, 1999 at no stage ever ordered dismissal of the
Appellant's Execution Application, either before or after the disbursal of
monies by the Madras High Court. Thus, no scope or requirement arose for
the Appellant to challenge the Order dated 3rd September, 1999 of the
Bombay High Court. The surrounding circumstances preceding such order are
important, viz. that faced with a brazen silence and the lack of
explanation, since the Registrar of the Madras High Court failed to respond
despite order of the Bombay High Court, the only restrained option left to
the Bombay High Court was to enable the appellant to urge matters before
the Madras High Court. Ordinary remedies of contempt of Court in relation
to non-compliance of orders of the Bombay High Court by the Registrar of
the Madras High Court were available, but were rather too harsh for the
Appellant to pursue, hence the Appellant pursued its Appeal already pending
before the Madras High Court.

14. Mr. Vipin Nair, learned counsel appearing for the respondent Nos. 1
to 4, firstly submitted that the Bombay High Court by order dated 3.9.1999
had directed the appellant to make its claim before the Madras High Court,
but the appellant had not challenged that order, which attained the
finality. Moreover, the High Court of Madras by order dated 27.11.2003,
had given liberty to the appellant to lay the claim before it under Order
42 Rule 11 of the Rules of the Madras High Court. Learned counsel then
submitted that there are seven other creditors, whose claims are pending
before the Madras High Court. Those creditors are parties to the suit and
they have lost their claim before the Madras high Court against the sale
proceeds lying in the High Court.

15. Learned counsel then submitted that the Madras High Court being the
transferee Court had jurisdiction to determine the inter-se priorities of
all the creditors or the claimants, in terms of proviso to Order 21 Rule 52
of the Code of Civil Procedure, 1908 as the vessel/ ship was sold free from
all encumbrances, being a sale conducted in an action in rem.

16. Learned counsel submitted that the appellant had knowledge of the
proceedings pending before the learned Single Judge of the Madras High
Court, where all the creditors were seeking relief for disbursement of
fund. The appellant had chosen not to object to the said disbursement and
not participated in the proceeding. The appellant, who is an unsecured
creditor, by standing outside the Court cannot claim exclusively on the
basis of an order of attachment.

17. We have elaborately heard the learned counsel appearing for the
parties. It has been pleaded on behalf of the appellant that the appellant
had obtained a decree for a sum of US$ 50,081.74 with interest from the
Bombay High Court in a suit against the judgment debtor and had also
obtained an order of sale of a ship of the judgment debtor which was lying
in the territorial waters of India at Madras. The said ship had also been
attached by the orders of the Madras High Court in a suit filed by
respondent No.1 for US$ 15,975.04. The Division Bench of the Madras High
Court on 17.4.1997 appointed an Advocate Commissioner in order to bring the
said ship to sale, with a view to preserve/prevent her from deterioration
and thereby protect her creditors. It is further pleaded that in April,
1997 the ship was brought to sale and on 26.5.1997 an earnest money of
Rs.35,60,000/- was received by the Advocate Commissioner from one M/s.
Jansee Steel Industries Pvt. Ltd. On 24.8.1997, the bid of Jansee Steel
Industries Pvt. Ltd was accepted and the Madras High Court confirmed the
sale in its favour and the balance amount was directed to be remitted. The
Advocate Commissioner was informed about the decree of the appellant on
25.9.1997. On 24.1.1998, the Madras High Court again confirmed the sale in
favour of M/s. Jansee Steel Industries Pvt. Ltd. In April 1998, however,
the said sale was set aside in appeal and a fresh sale was directed.

18. It is appellant's case that in an execution application filed by the
appellant, Bombay High Court on 17.3.1998 issued an attachment order under
Order 21 Rule 52 of the CPC directing attachment of a sum of US$ 58,325.64
(approximately Rs.20 lakhs) from and out of the funds deposited by M/s.
Jansee Steel Industries Pvt. Ltd. until further orders of the Madras High
Court. The said order of attachment was received by the Madras High Court
on 16th June, 1998. Meanwhile, on 23.4.1998, the sale was set aside and a
fresh tender was directed by the Division Bench of the Madras High Court.
However, the amount of earnest money lying with the Advocate Commissioner
was not returned to M/s. Jansee Steel Industries Pvt. Ltd. On 1.9.1998,
Madras High Court accepted the only bid of M/s. Jansee Steel Industries
Pvt. Ltd. and directed that the moneys be held over to the account of the
suit. On 7.9.1998, Registry of the Madras High Court effected the
attachment and returned the notice of the Bombay High Court with a pro
order to the Bombay High Court confirming that the monies directed by the
Bombay High Court to be attached stood duly held to the credit of the
appellant. On 25.9.1998, Bombay High Court passed an order directing the
Registrar of the Madras High Court to remit the funds lying pursuant to the
Order 21 Rule 52 attachment.

19. The appellant's case in a nutshell is that ignoring the decree and
the attachment of the Bombay High Court, the Madras High Court on 5.10.1998
paid moneys to the crew and other charges to other creditors who have no
decree in their favour. On 6.10.1998, on an application filed by the
Advocate Commissioner showing the disbursements, the Madras High Court
confirmed the disbursements and directed that the balance amount be placed
in a fixed deposit in view of the order of the Bombay High Court which, it
is specifically stated, was brought to its notice on 6.10.1998 only.
Learned counsel vehemently contended that the aforesaid events would show
that even though the appellant was a decree holder and had priority over
all other creditors, money was disbursed without there being any
adjudication of priority or dispute of title by the Madras High Court,
which disbursement could only have been done by Bombay High Court. Learned
counsel for the appellant also contended that Madras High Court had no
jurisdiction to deal with the moneys once the same were attached under Rule
52 of Order 21 CPC.

20. It is the case of the respondent that the appellant had knowledge of
the proceedings before the Madras High Court right from its inception and
despite this, the appellant did not participate in any of the proceedings
before the learned Single Judge and allowed orders to be passed. Division
Bench of the Madras High Court vide impugned judgment has, therefore, given
liberty to the appellant to make its claims before the learned Single Judge
under Order XLII Rule 11 of O.S. Rules of the Madras High Court. It has
been further contended that the appellant specifically stated in its suit
filed before the Bombay High Court that the subject vessel is lying in the
port at Chennai and it is only to conveniently avoid the contest with other
creditors who have all lodged their claims before the Madras High Court the
suit was filed in Bombay. Further, the appellant was the lone claimant
before the Bombay High Court whereas all the other claimants were pursuing
their claims before the Madras High Court, which alone has jurisdiction to
decide on the rights of the parties and the inter se priorities amongst
them.

21. Admittedly the vessel is berthed at the Madras harbor and,
therefore, the Madras High Court alone had jurisdiction to entertain any
claim against the subject vessel as per provisions of Section 3(15) of the
Merchant Shipping Act, 1958. The arrest of vessel by the Madras High
Court being the first arrest, the vessel and the sale proceeds are
custodial legis of the said court and no proceedings in Bombay High Court
can be maintained subsequently without leave of the Madras High Court. It
is also not in dispute that after the decree got transmitted to the Madras
High Court, appellant had again moved Bombay High Court and obtained
attachment order without notice to the creditors and claimants before the
Madras High Court, which act of the appellant clearly exposes that it
conveniently wanted to avoid any contest of its claim by other
creditors/claimants.

22. We have gone through the relevant provisions of Order XLII of Madras
High Court Original Side Rules: The said Rule reads as under:-

"Rule 3. In suits in rem a warrant for the arrest of the property maybe
issued at the instance either of the plaintiff or of the defendant at any
time after the suit has been instituted, but no warrant of arrest shall
be issued until an affidavit by the party or his agent has been filed,
and the following provisions complied with:
A. The affidavit shall state the name and description of the party at
whose instance the warrant is to be issued, the nature of the claim or
counter-claim, the name and nature of the property to be arrested, and that
the claim or counter-claim has not been satisfied.
B. In a suit of wages or of possession, the affidavit shall state the
national character of the vessel proceeded against; and if against a
foreign vessel, that notice of the institution of the suit has been given
to the consul of the State to which the vessel belongs, if there be one
resident in Madras and a copy of the notice shall be annexed to the
affidavit.
C. In a suit of bottomry, the bottomry bond and if a foreign
language also a notarial translation thereof, shall be produced for
the
inspection and perusal of the Registrar, and a copy of the bond, or of
the translation thereof, certified to be correct shall be annexed
to the
affidavit.
D. In a suit of distribution of salvage, the affidavit shall
state the amount of salvage money awarded or agreed to be accepted, and
the name and address and description of the party holding the same.

8. In suits in rem, sevice of summons or warrant against ship, freight
or cargo on board is to effected by nailing or affixing the original
writ or
warrant for a short time on the main mast or on the single mast of the
vessel and by taking off the process leaving a true copy of it nailed or
affixed in its place.

11. In a suit in rem, any person not named in the writ may intervene
and appear on filing an affidavit showing that he is interested in the
property under arrest or in the fund in the Registry."

23. Perusal of the aforesaid Rule would show that in a suit in rem
warrant of arrest of vessel is issued by the High Court, all interested
persons shall have a right to intervene and lay their claim by filing an
affidavit showing that he is interested in the property under arrest.

24. In the impugned judgment, Madras High Court has discussed elaborately
the sequence of events and reasons of disallowing the claim of the
appellant.

25. Indisputably in admiralty proceedings, where several persons have
lodged their claim, even the attachment made by Bombay High Court has to be
decided only if an application for payment of attached amount is made.
Admittedly the appellant without approaching the admiralty proceedings
sought a declaration that it is not entitled to priority. Being fully
aware of the development of the proceedings and suits in the Madras High
Court, the appellant did not raise any objection. In the result, the
learned Single Judge of the Madras High Court after hearing all the
parties, who had approached the Court, passed the order. In our considered
opinion, once the decree was transferred and transmitted by the Bombay High
Court to the Madras High Court, the appellant could not have moved the
Bombay High Court and obtained an order without notice to the creditors and
claimants. We are further of the view that when the property was in the
custody of Madras High Court, being the transferee court in question of
title of priority arisen between the person having decree in his favour and
person not being the judgment debtor is to be determined by the transferee
court. We are unable to accept the submission of the learned counsel for
the appellant that after order of attachment under Order XX1 Rule 52 CPC,
the Registry of Madras High Court had to remit the amount to Bombay High
Court ignoring the pendency of proceedings in the Madras High Court.

26. The decision in Shivshankar Gurgar vs. Dilip, (2014) 2 SCC 465
relied upon by Mrs. Menon, learned counsel appearing for the appellant, for
the proposition that the executing court cannot go behind the decree is not
at all applicable in the facts of the present case. In the said decision,
while considering an order of modification of the compromise decree by the
executing court it was held that it will amount to modification of decree
and, therefore, the same is without jurisdiction. Similarly, the decision
in the case of Oil and Natural Gas Corporation Limited vs. Modern
Construction and Company, (2014) 1 SCC 648, for the proposition that in the
absence of any challenge to the decree the executing court cannot go behind
the decree, will also be of no help to the appellant.

27. Further Mrs. Menon relied upon a decision in the case of Shaukat
Hussain alias Ali Akram and Others vs. Smt. Bhuneshwari Devi (dead) by Lrs.
and Others, (1972) 2 SCC 731 with regard to the power of the court which
passed the decree and the transferee court where the decree is transferred
will equally have no application in the present case where the Madras High
Court exercised admiralty jurisdiction.

28. It is worth to mention here that the Bombay High Court on 3.9.1999
gave liberty to the appellant to move the Madras High Court for appropriate
order for disbursement of amount. The Bombay Court held that no further
direction is required. For better appreciation, the order dated 3.9.1999
in the admiralty suit filed by the appellant is quoted hereinbelow :-
"According to the office of the Prothonotary the position remains the same
as 31st august, 1999. In other words, no communication has been received
from the Madras High Court. However, Ms. Sethna, learned counsel appearing
for the plaintiff, has very fairly brought to the notice of this Court an
order passed by the Madras High Court on 6th October, 1998. After noticing
the orders passed by this Court, the Madras High Court is directed that the
amount of Rs.12,38,164/- should be deposited in a fixed deposit for a
period of 46 days renewable periodically if necessary in the name of the
Registrar, High Court, Madras to the credit of the suit. As noticed
earlier, the plaintiff has already filed Appeal No.175 of 1998 in the
Madras High Court. In view of the above the plaintiffs are at liberty to
move the Madras High Court for appropriate orders for disbursement of the
aforesaid amount on the basis of the decree passed by this Court.

In view of the above no further directions are required.

........"

29. It has not been disputed by the appellant that the Bombay High Court
while passing the order of attachment was not aware about the fact that the
vessel was seized by the Madras High Court much prior to the filing of the
suit by the appellant in Bombay High Court. The Division Bench in the
impugned order has recorded the finding that Madras High Court while
deciding the issues in the suit filed under admiralty jurisdiction had
considered the interest and also priorities of all interveners and also
parties to the suit. It was held that the appellant ought to have made
claim under Order XLII Rule 11 of the OS Rules. The Division Bench rightly
held that no court is so prestige conscious that it will stand in the way
of legitimate legal proceedings for redressal or relief sought for by the
litigant. The Court also took notice of the fact that the necessary
parties who had led their claims had not been impleaded by the appellant in
the proceedings.

30. In the facts and circumstances of the case and having regard to the
law settled, so far the admiralty jurisdiction of the Court is concerned,
we do not find any reason to differ with the findings recorded by the
Division Bench of the High Court in the impugned order. For the reason
aforesaid, we do not find any merit in this appeal, which is accordingly
dismissed, however with no order as to costs.